Don’t expect an infrastructure levy any time soon

The government plans to axe section 106 agreements in favour of an infrastructure levy, but Richard Harbord warns that consultation paralysis, levelling-up concerns and developer opposition could block any progress.

[Readers may remember the scandal unearthed through FOIs that the then Conservative controlled EDDC were so focused on “Build, build, build”, around 2016, that they had lost track of S106 payments, including uncollected payments. – Owl] 

There are rumours that central government is planning a reform to the current planning legislation involving the removal of section 106 of the Town and Country Planning Act 1990. The understanding is that it would be replaced by a levy on developers.

Originally section 106 agreements required developers to build infrastructure whenever they constructed housing estates. They would be required to provide schools, doctors’ surgeries and any other relevant item that the increased number of residents would need. This became, in many instances, the payment of a cash sum to cover the estimated cost of such infrastructure or contribute towards it.

In many local authorities there are considerable Section 106 reserves where these deposits are held but not immediately used. It has also been used to secure a specified percentage of affordable homes (as defined).

This is not actually a new idea because the proposals in the subsequently scrapped planning white paper were for the replacement of section 106 agreements and the Community Infrastructure Levy with a fixed tax on development value paid at the date of occupation.

The government says that it is developing models for a new levy. This, it says, will enable local authorities to capture value from new developments more efficiently. It would be used to finance affordable housing and community infrastructure.

The devil will, of course, be in the detail and consultation will follow. However, an interesting side issue is the government’s tardiness in responding to consultations affecting local authorities. Glacial response times could be another effect of the pandemic, but some are suspicious that there is an unwillingness to deal with politically sensitive issues.

Stuck in the consultation queue

My point is that once the new levy proposals go out to consultation, they may well be stuck in a queue and not reach legislation for some time.

Developers, it has to be said, are not over-excited with the new proposals, arguing that a fixed-rate levy lacks the local flexibility of a section 106 agreement. There is also a feeling that fixed-rate levies may disadvantage certain parts of the country over others and be against the spirit of levelling up.

A figure of £7bn apparently could be raised through the levy, although that sum is not quantified over time a time period. Local authorities will be eager to see how the money is to be distributed and what limits there will be on its use. The spirit of such levies is that they are raised and spent locally. We will not know until we see the detailed consultation.